British motorists will receive up to 5,000 pounds towards the purchase of a low-carbon car from January 2011 to March 2012, Transport Secretary Philip Hammond said.
The amount committed on Wednesday is less than the 250 million pounds pledged by the previous Labour government over a five-year period.
However, a press officer for the transport department denied that the new government had cut the number of cars it could subsidise.
"There is no reduction in funding for the first 18 months, but after that it will be reviewed," the press officer told Reuters.
"It's a 5,000 pound incentive but it is up to 25% of the value of the car. The amount awarded could be less than 5,000 if cars come to market cheaper so the money will go further," the press officer added.
The transport secretary said the government will review the level of funding regularly to ensure Britain remains competitive and taxpayers get value for money.
"The first review will be in January 2012, at which point we will set the level for subsequent years," he said in a statement.
In its review, the government will consider whether the cost of vehicles has come down to determine whether a new subsidy level should be set.
(EurActiv with Reuters.)